7 Solid Ways To Fund A Startup
So you have a great business idea that you think will work in the current marketplace. Now is the time to begin thinking about how you would go about funding it. If you don't have the funds yourself to put into your business idea, you are going to need to find other ways to go about doing so. Luckily, there are all kinds of different ways to fund a startup. In this article, we will be discussing some of the top ways you could ultimately fund your new startup.
This is perhaps the easiest way to go about getting the funding you need for a startup. After all, your family is not only going to be people who inherently trust you, but they are going to be much more personally interested in seeing you succeed. Because of this, they are a good place to consider starting.
A lot of startups are funded by family members. (We call this the “friends and family” round!) So while your family members might have a little extra money they could invest into your business, there are some distinct drawbacks to getting funded this way.
Family members who give you money may feel like they’ve got a right to give you direction in your business efforts. Also, if the startup doesn’t get off the ground as quickly as you’d like or if it doesn’t get off the ground at all, you might not be able to pay them back.
If you choose to fund your startup with money from family and friends, be sure not only to set clear expectations for everyone’s role in this arrangement, but also sign contracts. It may feel icky to make your loved ones sign contracts, but having it all in writing can help seal those expectations and prevent hurt feelings or broken relationships later on.
This is how a lot of startups are being funded nowadays. Founders are using their own funds as a means to start their businesses but they are doing so on a 'bootstrap' budget. Luckily, bootstrapping has become easier and much more viable than ever before. The reason is simple: there are so many different tools and resources nowadays that make starting a business much easier and cheaper than ever before.
Typically, entrepreneurs look to bootstrap their business with either savings or low-interest credit cards. The thing you need to really understand about bootstrapping is that it’s a long road. You won’t have funds to give yourself a salary. You won’t have a massive marketing budget. Progress will be slow and you’ve got to be OK with that. Celebrate the small wins!
This has become a very popular and extremely viable option for many modern startups. Crowdfunding is trending and if you have an idea that a lot of people would enjoy, you might be able to get it fully crowdfunded right from the start. This is a great way to minimize the risk associated with starting a business because you are essentially selling the product or service that you will be offered prior to ever putting any money into it.
This is a great option for many that don't necessarily want to put their own money into the pot before knowing if the business concept is truly viable.
When you do get funded, you have an obligation to deliver on all your promises, so be sure that you do your research ahead of time to ensure all of your rewards for your funders are truly attainable.
Before you get crowdfunding, you’re going to need a marketing plan. Be ready to rally your audience to help you make this a success! The most successful campaigns are the ones where the founder brings a strong network along for the ride.
4. Small Business Loan
The traditional small business loan is always an option. Based on your credit history, there are plenty of banks out there willing to give you a loan. Be prepared with a strong business plan to prove that you’ll be successful (and be able to pay them back!)
Not every bank will take this kind of “risk”, especially for an unproven entrepreneur. You can also look toward companies like Kabbage or Fundbox for a quick decision online.
This is an excellent option for those that have great ideas, big ambition, a lot of hustle….. But are short on cash or funding options. Business incubators are available in a lot of different locations and can be a good opportunity for networking.
This is essentially how they work: You will be given space to build your business. Some incubators even provide you with funding to get started.
But getting accepted into an incubator is difficult. You’ve got to have an epic idea, an ironclad business plan, and the drive to really make this business a success.
Did you know that many organizations give out small business grants? The Small Business Administration—among others—hand out grants to various businesses throughout the year. Each one will have specific qualifications and, ultimately, it’s unlikely that a single grant will be enough to fund your startup completely and you’ll need other sources of funding to startup properly.
7. Venture Capital
If you’re not just starting a business, but have an idea that’s going to be a gamechanger for a specific industry or for the world, you can seek out venture capital. Firms all across the country raise money a few times a year with the intent of giving large sums of money to companies with serious growth potential. In return, these founders will see a high return on their investments as the companies scale and bring in big revenues.
Some examples of venture-backed companies include Google, ClassPass, Uber, Houzz, FabFitFun Box, and Casper mattresses. If you’re idea has the growth potential of companies like this and you have the team to scale your startup quickly, then venture capital might the right funding option for you.
Today there are more options than ever to get your startup funded. How you fund this new business will be entirely dependent on your goals for it. Are you going to be a small local operation or go the ecommerce route? Is your idea going to need lots of resources but has the potential to be the next big thing? Think about your skill set and what you want the company to do, and then you can start looking for funding to grow your startup.
Meet the Author: Shauna Armitage
Shauna is a Marketing Director or Fractional CMO helping early-stage startups scale with effective strategies, creative solutions, and unparalleled integrity by making the most of small budgets for maximum impact.
As a vocal advocate for women in business, Shauna is on a mission to redefine what it looks like to be a working woman and to support other women doing the same. She spends her free time traveling with her husband and four kids while drinking Coca-Colas. Connect with her on Instagram at @shauna.armitage.